Given the drawbacks it brings with it, having bad credit can be challenging. Many people know the consequences of having a poor credit score, such as negatively affecting your ability to get a decent insurance deal, qualify for a loan, and even find employment. Still, some people may not give much consideration to their credit health.
If you routinely miss loan payments or make late bill payments, your credit rating will suffer. In this blog article, learn how critical it is to maintain good credit and how having bad credit can hurt your financial life.
Getting a Loan Will Not Be Easy
Lenders will usually assess your qualifications before they decide to approve or reject your loan application. Of course, a key component of this assessment is checking your credit score. Your payment history and how many loans you currently hold are important factors in knowing your credit score. These factors are vital in the credit scoring models used by FICO and VantageScore.
You will have a difficult time getting a mortgage, vehicle loan, or credit card if your credit history contains red flags. Let us assume the lender accepts your loan application. Even so, the loan's interest rate will be higher. Many lenders now impose that applicants should have "good" or "excellent" credit scores.
Your FICO credit score should hit 620 or above to qualify for a conventional mortgage for a house purchase. To be eligible for an FHA mortgage, your credit score must be at least 500; however, you must put down 10% of the purchase price and pay for mortgage insurance, increasing the overall cost of your loan.
If you cannot get financing from traditional lenders, visit GoodCheddar for bad credit loans. Remember, consider bad credit loans only as a last resort.
Extra Deposit Requirement When Applying for Utilities
Do not be surprised if you must comply with additional requirements when opening an account with a utility company, especially if you have bad credit. For instance, customers with bad credit must deposit before opening an account. The deposit is a guarantee if you cannot pay the bill.
Even signing up for a phone provider can be difficult if your credit reports show warning signs. In this situation, you must make a deposit or use a prepaid plan. Moreover, it will be challenging to avail of deals or discounts on popular phones if you have poor credit.
High Insurance Premiums
Incurring credit card debt or failing to make loan payments can be detrimental to your credit score. If you are in this situation, your car insurance premium will be more expensive. It is a hard pill to swallow, especially for people with bad credit.
According to a study, there is a link between high credit risk and the possibility that drivers may submit an insurance claim to the insurance company. Drivers with poor credit had to pay double for insurance than those with good to exceptional credit ratings.
Trouble Finding a Rental Property
Looking for a rental home can be difficult if your credit history has some defects. This is because landlords will look into your credit score before approving your rental application, which will impact whether or not you will be allowed to rent the property.
You will have trouble renting a home if your credit records show late payments or defaults. You will need to either increase the security deposit or find a cosigner to fix such a problem.
Difficulty Getting Employed
If your credit is poor, finding work to support yourself could be challenging. In some cases, the job application process will include a credit check.
The majority of businesses (71%) surveyed by CareerBuilder in 2016 stated they do credit checks as part of the recruiting process, while the rest of the employers (29%) indicated they do not conduct a credit assessment.
Your credit history will reflect how well you handle your money, and employers today look at the credit score of job applicants before hiring them. It is especially true in any administrative employment or role that involves handling money. Such job positions almost always require a credit assessment. As a result, never take your credit history for granted, particularly if you are looking for work.
Final Thoughts
Never make the mistake of thinking that your credit score is just a number since having a poor credit score can have a big impact on many different aspects of your life. You should maintain good credit health because it is used by lenders, utility companies, insurance companies, landlords, and employers to evaluate your capacity to meet your financial responsibilities.
Make sure to pay off your loans, credit cards, and payments on time. Loans are not affordable today, but you have to pay them. If you take out a loan, see to it that it will be reported to major credit bureaus because that indicates that you have the chance to build your credit score by making your loan payments.
